Question

Define and explain the difference between “gross” GDP and “per capita” GDP. Which is a better indicator? Which is a better indicator of “income” strength in an economy? Why?

Answer 1

Solution:

Gross GDP is the sum of market value of all the goods and services produces within the country.

Per capita GDP is GDP divided by the population of the country.

Per capita GDP is the better indication of income strength of an economy because it takes into the consideration of population.

The economy that has higher per capita GDP is better as compared to the economy that has lower per capita GDP.

We can take the example of India that has higher GDP than most of the European country but lower per capita GDP due to higher population.